Right Sizing the Budget

The School Board of Morgan Hill Unified School District and Leadership team are preparing for an estimated budget adjustment of $5.5 million for the 2017-18 school year. A number of factors, including this year’s student enrollment and state funding, will determine the final adjustment needed and how proposed expenditure reductions will impact schools and staff. The District anticipates making the budget adjustments through a combination of revenue enhancements and expenditure reductions.

Morgan Hill Unified School District is not alone in its budget challenges. The most recent statewide data (March 2017) showed that 39 districts in California indicated that they may not be able to meet their financial obligations in the next three years amid flattening State revenues, rising pension costs and, for many, declining enrollment. Ron Bennett, Chief Executive Officer of School Services of California, notes that all districts will be deficit spending (spending more than the revenue they are generating) in the third year of their three-year budget projections.

Our District has been preparing for this situation by keeping our reserve (or savings) well above what is legally required by the State. Our District Board has strategically adopted policies that require the District to maintain a reserve level of three months of operating expenditures, which is more than 13% higher than the reserve level required by the State. However, with increased costs, including much deserved raises for our staff, we are anticipating a shortfall of $5.5 million dollars next year. It is important to remember that reserves are one time funds, meaning once they are used they do not replenish without purposeful action. If we were to do nothing, we would deplete our fund balance within the next three years.

To help us with these challenges, the District has formed a Right Sizing the Budget Committee and we will be providing several opportunities for public input during this process. By taking action now, well before we are in any crisis, the Board and Leadership Team’s proactive management of the budget will ensure the long-term financial stability of the District enabling the District to continue to deliver the best education for our youth.